If You Make $18.50 an Hour, How Much Is That a Year?

An hourly wage provides compensation based on hours worked. Understanding how this translates into an annual income is helpful for financial planning and budgeting.

Calculating Annual Gross Income

To determine annual gross income from an hourly wage, a standard full-time work schedule is assumed. A conventional full-time work week in the United States is 40 hours. There are 52 weeks in a year, which provides the multiplier for calculating annual earnings.

For an hourly wage of $18.50, the calculation is the hourly rate multiplied by 40 hours per week and 52 weeks per year. This results in an annual gross income of $38,480 ($18.50/hour 40 hours/week 52 weeks/year). This figure represents “gross income,” the total amount earned before any deductions are subtracted.

Impact of Working Hours

Annual gross income varies based on the actual number of hours worked. Individuals working part-time, for example, work fewer than 35 hours per week. Working 20 hours per week at $18.50 an hour yields $19,240 annually, while 30 hours per week amounts to $28,860 per year.

Overtime hours also impact annual earnings, as the Fair Labor Standards Act (FLSA) requires employers to pay at least 1.5 times the regular rate for hours worked over 40 in a week. For $18.50 an hour, the overtime rate is $27.75 per hour ($18.50 1.5). Working five overtime hours per week adds $138.75 to weekly gross income, increasing the annual total. Conversely, annual income can decrease if fewer than 52 weeks are worked due to seasonal employment or unpaid leave.

Understanding Net Pay

While gross income is the total amount earned, “net pay,” also known as take-home pay, is the amount received after deductions. The primary reason for the difference between gross and net pay is the withholding of taxes.

Federal income tax is withheld based on factors like income level and filing status. State income tax is also withheld in most states, while some states do not levy an income tax. Federal Insurance Contributions Act (FICA) taxes, including Social Security and Medicare, are withheld. For 2025, employees contribute 6.2% for Social Security (up to an annual wage base limit of $176,100) and 1.45% for Medicare, with an additional 0.9% Medicare tax for higher earners.

Common Payroll Deductions

Beyond taxes, various other deductions reduce gross pay to net pay. These can be categorized as pre-tax or post-tax deductions. Pre-tax deductions, like contributions to a traditional 401(k) retirement plan or health insurance premiums, are subtracted from gross income before taxes are calculated, reducing taxable income. This can lead to tax savings.

Post-tax deductions are taken out after taxes have been applied and do not reduce taxable income. Examples include Roth 401(k) contributions, life or disability insurance premiums, and union dues. Wage garnishments, which are court-ordered deductions for debts like child support or unpaid taxes, are also post-tax. These deductions, whether voluntary or mandatory, impact the final take-home pay but often provide benefits such as healthcare coverage or future financial security.